A.M. Best Assigns Credit Ratings to Stellar Insurance, Ltd.

A.M. Best has assigned a Financial Strength Rating of A (Excellent) and a Long-Term Issuer Credit Rating of “a” to Stellar Insurance, Ltd. (Stellar) (Bermuda). The outlook assigned to these Credit Ratings (ratings) is stable.

Stellar is the captive insurer of Saudi Arabian Oil Company (Saudi Aramco), the state-owned oil company of Saudi Arabia.

The ratings reflect Stellar’s excellent risk-adjusted capitalisation, track record of very strong operating results and its strategic importance to Saudi Aramco as a risk management tool. The ratings also take into account the credit profile of Saudi Arabia.

Stellar is a key part of its parent’s enterprise risk management framework. The captive’s purpose is to provide financial risk transfer solutions for risks emanating from Saudi Aramco’s operations. Stellar’s business mix consists of energy onshore and offshore property, general liability risks, as well as associated business interruption cover.

Stellar benefits from excellent risk-adjusted capitalisation, which is supported by strong internal capital generation, low underwriting leverage and a comprehensive reinsurance programme. Saudi Aramco has strengthened Stellar’s capital position and enhanced its underwriting capacity by allowing the captive to retain all profits generated since its incorporation in 2001. Capital requirements as per A.M. Best’s Capital Adequacy Ratio are largely driven by investment risk, as Stellar holds a significant proportion of assets in funds of varying liquidity and duration. Furthermore, Stellar’s liquidity is enhanced with a credit facility provided by the parent.

The captive’s track record of very strong operating performance is primarily driven by robust underwriting results, as demonstrated by a five-year average combined ratio of 32%. Prospective performance remains subject to volatility due to the captive’s exposure to high severity, low frequency losses in its energy programme. However, the peak risks would be partly mitigated by its extensive reinsurance programme, which is placed with financially strong reinsurers.

A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.

This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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